Hawaii Cuts Back on Solar Power Subsidies

Hawaii is cutting back on solar power subsidies, as the spending is consuming an increasingly large chunk of the state budget and the recent surge in rooftop solar production threatens the stability of the state’s electric grid.

Budget, Power Grid Imperiled

Hawaii has experienced a surge in rooftop solar power systems due to promotion of solar energy through the nation’s most aggressive renewable energy program and one of the country’s most generous tax credits.

The number of solar power systems in the state has doubled every year since 2007. Currently, more than 21,223 systems provide 149.4 megawatts of power—approximately six percent of the state’s total peak load.

The solar power production surge has been costly and problematic for the state’s electric grid. Solar tax credits cost drained $173 million from the state budget in 2012.

“Hawaii’s budget crisis is worsened by the state’s commitment to solar energy, and their electric reliability suffers as well,” said Tom Tanton, president of the T2 & Associates energy technology and policy consulting group. “Government manipulation through over-generous ‘incentives’ most often leads to such situations,” Tanton explained.

Grid Instability

Meanwhile, Hawaiian Electric Co. warns the electric grid is vulnerable to power fluctuations and blackouts because so much of the grid consists of intermittent solar power.

“This sudden photovoltaics surge has brought challenges to our island grids, which were not designed to handle so much distributed generation,” said Peter Rosegg, spokesperson for Hawaiian Electric Company. The company serves 95 percent of the state’s population.

Rosegg said each Hawaiian island has a standalone grid with no integration with other islands or the U.S. mainland.

“With an average peak of a little over 1,200 MW, Hawaiian Electric serving Oahu is the largest system in the islands, but it is still small—and the other islands far smaller—compared to interconnected mainland grids,” he said.

Rosegg said the grid has already experienced voltage changes due to solar power fluctuations that could result in blackouts.

State Takes Action

Hawaii has one of the most generous solar tax credits in the nation, paying 35 percent of the cost for anyone installing a photovoltaic system.

In November, the Hawaii Department of Taxation announced the solar tax credit would be cut in half, effective Jan. 1, sparking backlash from the renewable power industry and environmental activist groups that promote renewable energy and benefit from the subsidy.

Activist Groups Sue

EarthJustice, an activist law organization, is representing the Sierra Club in a legal challenge against the Department’s changes to the solar tax credit.

The activist groups claim the Department’s new rule on solar tax credits conflicts with the law’s intent of encouraging widespread adoption of residential and commercial solar power systems. Such encouragement is needed, the activist groups argue, for the state to reach its goal of producing 40 percent of its power from renewable sources by 2030.

Politics vs. Physics

Tanton notes the politically driven renewable power mandate ignores the realities of power grids. According to Tanton, encouraging the production of intermittent electricity is both inefficient and problematic for grid stability.

“They’d do well to limit the number of tax credits, as some other states have done, or better yet suspend the program until the rest of the grid catches up. Even better than that, allow taxpayers an extended holiday from subsidizing high-cost technologies that just can’t make it on their own,” Tanton said.

Rosegg said Hawaiian Electric Co. and its subsidiaries are involved in several studies to determine how more variable renewable energy can be added to the grid without sacrificing reliability.